In Summary
  • The entry of politicians — starting with individuals with family ties to the first three Presidents — into the tea business changed the matrix and chances of farmers eking a living out of their produce dwindled.

  • After all, the policy-makers who would have guided the industry were now interested parties and wanted to make money out of farmers’ sweat — as brokers and middlemen.

Before 1987, Kenya had only three tea brokers — and that was before things started going south. Now, as matters get worse within the sector, even the brokers are complaining.

To become a broker in those days, one had to apply to both the East African Tea Trade Association (EATTA) — a body which controls the tea trade in eastern Africa at the Mombasa auction — and the then regulatory authority, the corrupt and inept State-run Tea Board of Kenya (TBK).

INSIDER TRADING

But when the Kenya Tea Development Agency (KTDA) chairman, the late Stephen Mugambi Imanyara and his predecessor Eustace Karanja, opened their own brokerage, Centerline, the game changed.

And after President Daniel arap Moi’s children teamed up with his son-in-law, the late Stephen Kositany, to join the show with the brokerage Bicorn Exim Limited, what followed was a muddied field where politics and commerce dined together.

By becoming a broker — as well as custodian of farmers’ tea — Mr Imanyara, who used to own Imenti House in Nairobi, had broken all the rules in the book and gotten away with it. The same practice was a norm at the Coffee Board of Kenya where its directors were also traders and brokers. It led to the collapse of the sector.

Those who held regulatory authority became the wealthiest tea traders in Kenya. Mugambi was the sole transporter of KTDA tea and the king of insider trading.

Before that, the only local broker was the late Ejidio Wahome’s Tea Brokers of East Africa, which was registered in 1978 by George Emks, who owned majority shares.

After the death of Mr Emks, Mr Wahome bought the company and brought on board then Vice-President Mwai Kibaki and their mutual friend, David Mathenge.

At what point things went south remains a puzzle. But the issue of politicians and agriculture insiders with interest in the tea trade was raised as far back as 1999 by former Githunguri MP Njehu Gatabaki, when he told Parliament: “The problem with KTDA is that everybody, from the senior officer to the lowest officer, deals in the business of selling, marketing and procurement of tea services.”

VESTED INTERESTS

He went on: “Tea brokerage is controlled by who is who in Kenya. The President is a tea broker, Hon (Nicholas) Biwott is a tea broker and former Minister for Finance, Simeon Nyachae, is also a tea broker … when will we distinguish between vested interest and public interest?”

Mr Nyachae had interests in Choice Tea Brokers, together with John Simba — the man who in 2007 had been picked to lead a task force to probe the woes in the industry.

It is not clear whether they still own the company but on its website, the company says “the board of directors of Choice Tea Brokers comprises people of high standing in the community, the government of Kenya and the business fraternity”.

The entry of politicians — starting with individuals with family ties to the first three Presidents — into the tea business changed the matrix and chances of farmers eking a living out of their produce dwindled. After all, the policy-makers who would have guided the industry were now interested parties and wanted to make money out of farmers’ sweat — as brokers and middlemen.

When insiders within the TBK and KTDA started becoming brokers, questions were raised on who stood on behalf of farmers as conflict of interest reigned.

TOTAL PRICE

Others who entered into the trade included former Coast Provincial Commissioner, the late Eliud Mahihu, when he was a member of the KTDA board and also chairman of the regulator TBK for 14 years. He was operating Venus Tea Brokerage with some members of the Moi family.

As far back as 1992, Mr Mahihu had complained that levies collected from farmers to finance access roads had not been spent on this purpose. He claimed that $3.2 million (Sh320 million at current rate) had been misappropriated in 1990. Mr Mahihu was first appointed as board chairman in 1980, when Mr Lucas Galgalo replaced him as the Coast Provincial Commissioner.

Before 1987, it was hard to penetrate the membership of EATTA; it called for stringent qualifications. Brokers were required to have qualified tea tasters, the equivalent of wine connoisseurship. These tasters determine the quality of the product on the lots already committed for sale at the auction.

Also, the broker had to have good financial backing and a bank guarantee to ensure that he was able to pay the price of the lot on bid. What farmers have never been told is that once the hammer falls, their money is paid to KTDA within nine days less 0.75 per cent and that when the buyer pays, he gives the broker 0.5 per cent of the total price.

KICK BACKS

In effect, the broker earns 1.25 per cent of the purchase price. How the balance of 98.75 per cent is shared — and why tea farmers end up with a fraction of the auction price — is the story of KTDA. While brokers may be part of the problem, the industry regulator and KTDA appear to have failed farmers.

Previously, and before the liberalisation of the sector, KTDA used to assign brokers to various factories. After liberalisation, this was left to factory directors. It was also the beginning of mayhem in the sector.

“Unless you bribe these directors, they will never sign any contract for you,” says a broker who has lost key factories. And since factory directors owe allegiance not to farmers but to KTDA, which vets their election, growers are unable to understand the complex nature of tea auction.

Brokers are usually given three-year contracts but factory directors have a leeway to reduce the term — creating a chance to ask for kick-backs.

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